When is it right for government imposed contraints on pay?


I want to gather my savings, invest the capital to open a corner shop business, and pay myself a salary while i’m running the business. Should the Government determine my pay? I don’t think so.

Say my corner shop does even better than I had hoped. This year’s profit was terrific. I think I deserve a bonus and pay myself a handsome sum. Should the Government limit my bonus? I don’t think so.

Now I want to expand my shops and open two new shops in the next suburbs. I ask the bank to lend me money to finance the expansion. The bank agrees. Does the bank care what I pay myself? Not much, as long as its loan is repaid. Should the Government care? I don’t think so.

Years later, my business was doing very well and I wanted to release some of my capital back to me and my family. We wanted to have luxurious holidays and drive fast cars. A stockbroker finds investors who want to invest equity in the business as part ownership. We agree and the business now has independent stockholders. Are the stockholders interested in my pay? Yes, they are. They devise a means by which I must report to them what I am to be paid for the next year and they have the voting power to refuse (or sack me). Should the Government care about what the stockholders and I agree to? I don’t think so.

I am now paid in mega dollars. The business has suffered a little in recent years as probably, I am paid more than I am worth elsewhere. Do the stockholders care? Yes. They decide to change my remuneration. In future, there will be a small(ish) base but a big performance bonus if the business turns around. Should the Government interfere and limit my possible bonus? I don’t think so.

The Government has no right to interfere. Not ever. Not for a sole proprietor corner shop and not for a publicly owned institution. It is never acceptable to pander to petty jealousy and try to call it socially responsible policy making. If the shareholders of Company XYZ want to pay their CEO an excessive sum, that is no business of mine, unless I am a shareholder. And therefore, it is no business of Government, unless Government is a shareholder.

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